By Prabhakar Kulkarni*
Indian political rulers have so far accorded priority to urbanization and industrialization thereby neglecting rural India which forms majority of voters in the country and has therefore the very basis of Indian democracy. Banks have also neglected the farm sector even though the central authority of the Reserve Bank of India (RBI) has allowed them the discretionary power to provide adequate credit to the farm sector as also waiving off the loans of the distressed farmers.
The truth has now come out that banks have denied both the adequate credit and waiver of loans to farmers with the result that more than three lakhs farmers in the country have resorted to suicides and the condition has continued even today.
According to National Crime Records Bureau’s latest farmers’ suicides data, 80 percent farmers who killed themselves had taken loans from banks and finance companies (not by private money lenders )and they were under the debt-burden due to conditions beyond their control.
But the banks have not waived their loans even though farmers were distressed due to drought and other adverse conditions. These institutions have reportedly waived off loans of over 2 lakh crores taken by industrialists and corporate units in their own discretionary power.
While industrialists and corporate giants did not demand for waiver to the Union or state governments, farmers are expected to demand for waiver and are still demanding with appeal to the Union government.
Why this discrepancy? Why banks have not waived loans of the distressed farmers and not prevented their suicides?
The need to find out prompted I asked Reserve Bank of India (RBI) via mail as to why there is discrepancy in waiving off loans by banks to industrial and corporate sector and denying the same facility to the distressed farmers. The reply received is shocking and disclosing as to how banks as also RBI and Union governments can be said to be responsible for farmers’ suicide.
In its reply the RBI has sent a circular pointing out that Chairmen of all commercial banks are allowed to take policy decisions regarding credit and loan waiver and the farm sector is included in it. Section 2 of the circular No. BPBC 21/1/04095 Dt. 28th July 1995 states that each bank should decide loan and recovery policy, manner of recovery of dues, targeted level of reduction, norms of permitted sacrifice/waiver of loans etc.
The circular’s section 3 (b) points out that proper distinction should be made between willful defaulters and borrowers defaulting in repayments beyond their control.
The circular has allowed all commercial banks to take decision regarding loan waiver. But is the farm sector included in the list for loan waiver? When asked this question, the RBI replied, “It is advised that the circular (dated July 28, 1995) in reference is applicable to all the loans of banks, including those to farm sector.”
What about the co-operative banks? I requested the RBI by next mail – “Thanks for your prompt reply stating that the circular (dated July 28, 1995) in reference is applicable to all the loans of banks, including those to farm sector. Now please let me know whether similar policy discretion is given to District central co-operative and urban co-operative banks in the country.”
The RBI has not yet replied this query. The reply is necessary because the RBI has control over co-operative banks also and has taken action in cases of some erring co-operative banks.
It is now clear that despite the circular banks have not considered the farm sector in their policy of loan waiver even though the RBI wants the farm sector to be included in the policy. Bank’s neglecting the farm sector indicates their failed responsibility in preventing suicides of the distressed farmers under loan burden.
Even the first case of a distressed farmer’s suicide should have alerted banks to take initiative and study cases and waive loans. But even after a spree of suicides leading to over 3 lakh suicides during last five years in the county no bank came to the rescue and even now suicides have continued even the circular dates back to 1995 almost during last twenty one years when the RBI ruled the banks and both the UPA and the NDA ruled the country.
NABARD (National Bank for Agriculture and Rural Development), which is established for protecting farmers’ interests and intervening by keeping liaison between banks and farmers, has failed to question banks in this regard and to compel them to waive distressed farmers’ loans. This may be because farm sector is not represented in the NABARD’s board of directors, strangely enough when the bank is formed for the farm sector.
Even the nationalized banks have no representative from the farm sector.
*Senior journalist who has worked as regional correspondent for several top national dailies